Marketing Metrics: Need for Managers

-Sreeram VP(16PGM44)

The case is about choosing metrics that evaluates the performance of the marketing actions that are
performed by the marketing professionals. The introduction part emphasizes that the marketing
department is the cost center of the firm and its effectiveness are poorly measured. E-commerce industry
is the eye opener for marketing analytics and is the first firm to adopt it.

Goal setting is one of the marketing evaluation that measures the individual level action in the
organization towards the strategic level objective. The individual level objective should be inline with
strategic level objective. Goal setting can be simply done by fixing multiple level of targets. However, goal
settings have its demerits like employee’s face lack of focus on particular goal, because of too many goals
fixed by the aggressive firms.

The criteria that are used for creating metrics are perspective involved in measuring the effectiveness.
Intermediate, internal vs external, consistent and brevity are the properties that each metrics should
possess. Intermediate is the ability of the firm choosing the metrics before the transaction happens.
Internal measures the input efforts that is put for the end result where as external measures the final end
result. The chosen metrics should be focused (consistent) and it should provide information about the
underlying sub metrics.

Some of the metrics that are discussed here are,

1. ROI
ROI is the returns that a firm enjoys for the particular investment. It is the usual metric used by
the firm. However, it is biased in nature since its period of calculation is subjective

2. Market share
It is the percentage of product sales in the particular market. It projects the firm position in the
market. However, it fails to identify the external threats in the market and the market leader is
not the firm that enjoys the highest level of profitability in the market.

3. Customer Life Time value (CLV)

The value of customer who brings to the firm during the particular duration of time. It helps the
firm to set goals like customer retention rate and margin per customer. The problem with CLV is
identifying the right customer who brings right value to the firm.

4. Net Promoter Score

It has a scale of 0 to 10 that measures how likely a customer recommends the product to other
people. NPS is classified into 3 groups viz promoters (9-10), passively satisfied (7-8) and detractor
(0-6). It will not help the firm to firmly decide on customers preferring to their rival brands.

5. Customer Satisfaction (CUSAT)

It measures the satisfaction level of the customer. However, it is subjective and broad in range. It
helps the smaller firm to focus more on the satisfaction level rather than the large firms.

Sreeram VP 16PGM44
The marketing effectiveness is measured by the actions that are performed by the marketers in marketing
mix.

Some of the promotional metrics used are,

1. Brand Awareness
Consumers usually prefer the brand that they are aware of. It is measured using aided (recall)
and unaided (recognition). However, it doesn’t guarantee the firm that customers purchase the
product, if they have high brand awareness.

2. Brand preference
The rational or emotional reasons that a customer uses to prefer the brand among the
competitors is called Brand preference. It measures the effectiveness of marketing campaign.
However, it can be measured among the target audience.

3. Purchase intentions
It measures how likely potential customer buy the product in a given time frame. However, it may
exceed the sales figure because of financial concerns or overestimation of purchase intentions.

4. Share of voice
The advertising activity of a firm within a product category. The firms want to have less advertising
expenditure so that it can exploit the brand recall with a single advertisement cost.

5. CPM
Cost Per 1000 impressions. It measures the cost efficiency of the promotional tactics at exposing
customers to brand messages. It is used in offline media like radio, television and print
advertisements. CPR or Cost Per Click is used in online medium where it measures the number of
the clicks that is made by the consumer.

6. Customer Acquisition cost

It is cost of firm to acquire additional customer through a promotional tactic. However, the firm
do not value all the customers equally so it is not necessary that only high value customers are
attracted for a particular marketing activity.

Some of the pricing metrics are,

1. Percentage sales
Portion of sales that were made while the product was priced at a lower price.

2. Minimum advertised price (MAP)

The lowest price that a firm spends on the advertisement by receiving a fund from the
manufacturers is called MAP.

3. Initial Markup Factor (IMU)

It is determined by the firm to determine the retail price of the product. It is given by Unit Retail
Price per unit cost to retailer.

Sreeram VP 16PGM44
The performance of the channel is evaluated by Channel metrics and they are,

1. All commodity value (ACV)

It measures the breadth of distribution of products in particular area. However, if the firm have
large breadth of product categories then it measures would be difficult for the firm to measure
the performance of the product.

2. Inventory turns
It measures the number of times the firm sells the inventory over a year. Higher the turns, it is
beneficial for the firm. However, higher inventory may lead to risk of loosing the sales.

The product metrics is all about the measure of performance of firm’s current and future new products.
The metrics used are,

1. Cannibalization
The increase in sale of new product is by decrease in sale of existing product. It helps the firm to
avoid the customer moving to their competitor brand. It also helps the firm to know about that
the customers are not satisfied with the existing product and higher revenue among the product
categories. However, very large cannibalization will increase the manufacturing complexities and
increases inventory cost.

There is no sole metrics that measures the marketing effectiveness in both individual as well as
management level. Instead combination of metrics helps the marketers to achieve their individual goal,
in turn achieving the overall strategic objective of the firm.

Sreeram VP 16PGM44